RBA’s Glenn Stevens Reappointed as Governor for Further 3 Years

By Michael Heath -
Apr 3, 2013

Australian Treasurer Wayne Swan
extended the term of Reserve Bank Governor Glenn Stevens as the
government seeks stability five months before an election.

Stevens’s seven-year term was set to end Sept. 17, just
three days after the election, and was extended by three years
at the governor’s request, Swan told reporters in Canberra
today. He named Kathryn Fagg a member of the central bank board
for a five-year term from May 7, replacing Jillian Broadbent.

“The risk was that it became a political football and that
would be something that was negative for markets, but this gives
certainty,” said Paul Bloxham, chief Australia economist at
HSBC Holdings Plc and a former RBA economist. “He’s widely seen
as a strong central bank governor from a global perspective.”

Stevens, 55, lowered the benchmark interest rate by 1.75
percentage points in the 14 months through December to rebalance
a two-speed economy as mining regions thrive off Chinese demand
while manufacturers struggle under the strength of the local
currency. Since taking the helm in 2006, he has presided over
annual inflation that’s averaged within the RBA’s target range
and unemployment near 5 percent as the world’s 12th-largest
economy extended a recession-free era to 21 years.

“There’s no doubt that Glenn has made an enormous
contribution to Australia’s economic performance and financial
stability since his appointment seven years ago,” Swan said.
“He is in particular recognized around the world as a key
policy maker and one of the best.”

Currency Reaction

The currency was little changed after the announcement,
trading at $1.0457 at 4 p.m., extending its period above parity
with the U.S. dollar to nine months, the longest stretch since
it was freely floated in 1983.

Under the Reserve Bank Act, the treasurer names the
governor and his No. 2 for terms of as long as seven years.
Opposition finance spokesman Andrew Robb had said in January
that Prime Minister Julia Gillard’s government should hold off
announcing the next central bank chief until after the election.

Swan’s announcement today sought to douse a succession
debate that risked unsettling investors in the pre-election
period. Opposition Treasury spokesman Joe Hockey said the
Liberal-National Coalition should have been consulted.

A “consultative phone call” would have “removed any
perception of political game playing by the government,” Hockey
wrote in an emailed statement.

Earning almost A$1 million ($1.05 million) a year as
governor, Stevens’s 4.25 percentage points of rate cuts helped
Australia avoid recession during the global slump of 2009.

Top Grade

Stevens’s “intellect, integrity and calm leadership have
been critical to the on-going strength of our banking system and
our economy more broadly,” said Ian Narev, chief executive
officer of Commonwealth Bank of Australia (CBA), the nation’s biggest
lender. “We all benefit from his willingness to serve another
term.”

Stevens was one of six central bankers given a top grade in
a 2012 ranking by Global Finance magazine based on their ability
to control inflation, achieve growth goals, maintain a stable
currency and manage interest rates. It was the fourth straight
year he received an ‘A’ in the evaluation.

Even so, Stevens’s term hasn’t been without controversy.
The governor testified to a parliamentary panel last year as
lawmakers investigate corruption allegations at the RBA’s note-
printing units in the biggest scandal at the central bank since
it gained independence in 1996.

Less Transparent

The workings of the RBA are less transparent than those of
its counterparts in the U.S., Japan, and the euro region, with
only Stevens and his deputy allowed to speak on monetary policy
issues. Stevens also doesn’t hold news conferences, unlike his
peers at central banks in those areas and in the U.K., South
Korea, Mexico, Chile, Peru, Colombia and Canada.

Australia’s central bank doesn’t vote on rate decisions --
coming to a decision by consensus -- and doesn’t reveal what
members said at the meeting. Under his tenure, the bank did in
December 2007 start releasing minutes of board meetings and
publishing a statement to explain its decisions after each
monthly gathering.

Macfarlane, Coombs

Stevens joined the central bank in 1980 and headed several
divisions before becoming an assistant governor in 1996 and
deputy governor in 2001. He gained a bachelors degree with
honors in economics from the University of Sydney and a masters
from the University of Western Ontario in Canada.

The governor’s predecessor Ian Macfarlane was appointed to
a shortened, three-year second term in 2003 at his own request,
according to the then-Treasurer Peter Costello. Macfarlane and
Herbert Coombs, who served an 8 1/2-year term as the bank’s
first governor, are the only heads of the central bank to have
served for more than seven years.

Stevens’s additional three years will allow for a smooth
transition to his deputy, Philip Lowe, who became the No. 2
official at the central in February last year, said Annette Beacher, head of Asia-Pacific research for TD Securities Inc. in
Singapore. Stevens served about five years as deputy before
replacing Macfarlane.

Swan’s extension of Stevens’s term “eliminates any
possibility of it being interpreted as a ‘political
appointment,’ and should be a decision welcomed by Australian
and offshore investors alike,” Beacher said.

Swan also announced he would recommend Wayne Byres as chair
of the Australian Prudential Regulation Authority.